Issue 6 | May 14, 2019

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The Potential Effect of Integration on Uganda Airlines' Success

Emmanuel Keith Kisaame, Research Fellow, ACODE | @ACODE_Uganda

On Tuesday 23rd April 2019, Uganda received two CRJ900 bombardier jets which marked the re-enactment of the Uganda Airlines – a national carrier that went out of business in 2001. The revival of Uganda’s national carrier has however been shrouded in scepticism, with many Ugandans not buying into the reported twin objectives of boosting national pride and tourism. Perhaps the most significant doubt arises from the fact that with the exception of Ethiopian Airways, all the national carriers/airlines on the African continent are making losses and have become a burden on the tax payer. A lot has been said about what Uganda needs to do to profit from its national carrier but could regional integration be a contributing factor?

A bit of context first!

For one to understand the sentiments surrounding the revival of Uganda's national carrier, a bit of context is needed. Uganda Airlines was first established in 1976 and dissolved in 2001. At the time of its dissolution, the Airline was shrouded in crippling debt that mostly stemmed from mismanagement and undercapitalisation. Enter April 2019 and the talk of reviving the airline is actualised. There are sound arguments for and against the revival of the national carrier. While that debate rages on, Uganda has recieved the planes and Uganda Airlines is revived. So this article considers how Uganda can make the most of this investment.

The country will do well to heed the numerous calls from different actors to avoid the mistakes of the past– under capitalisation and mismanagement. That is because in the wake of Uganda Airlines' revival in 2019, many parallels could be drawn with the period that led to its dissolution. First, the Bombardier jets arrived a month late, owing to the kind challenges that have come to constrain many of the major public investment projects in Uganda over the past decade. The purchase of the planes was funded via a supplementary budget which in itself is an indication of planning challenges. Why would we need a supplementary budget when the revival decision was taken a while back and the order for the planes was placed last year? The process of approving the supplementary budget by Parliament laid bare many issues concerning the ownership of the Uganda Airlines brand, particularly the allotment of shares for the company.

After weathering that ownership storm, there were early indications that we had learnt key lessons – especially since the company secured seven regional routes to Nairobi, Mombasa, Bujumbura, Khartoum, Dar-es-Salaam, Juba, and Mogadishu by the end of April 2019. However, the operationalization of the airline has been thrown into further delay as parliament refused to approve some of the operational funding. In the week of 5th May, 2019, it was reported that parliament declined to approve the UGX 37 Billion meant to finance ground-handling services. In its refusal, Parliament cited failure by the responsible actors to adhere to its directive to appoint a substantive Board for Uganda National Airlines Company. Such delays cannot be entertained in the cut-throat business environment of air transport. We simply need to do better.

How does the integration of regional air spaces help?

The integration of regional air spaces in one of the potential salient success factors for Africa’s national airlines but it has not attracted the attention and action it deserves. It simply refers to the liberalisation of airspaces and related services. Currently, many African countries operate protectionist policies in their air transport sectors. It is worth noting that the integration of African Air spaces is not a new phenomenon. It has been discussed by African governments, agreements have been signed but not much has been done to implement it. As part of its Agenda 2063, the African Union launched the Single African Air Transport Market (SAATM) in 2018 with the idea of improving air connectivity, boosting passenger traffic and ultimately spurring economic development. Prior to the SAATM, a similar agreement aimed at liberalising Africa air transport industry was signed in Yamoussoukro in 1999. The Yamoussoukro Declaration has however not yielded much due to years of inaction. Uganda is one of the opponents to the recently launched SAATM due to fear that its implementation would result into domination by the existing ‘big’ airlines on the continent like the Kenya, Ethiopian and South African Airways. In my view however, nothing could be further from the truth. The Air Transport industry is so unique that synergies will benefit all air lines, 'big' or otherwise.

Take improving connectivity for instance; many frequent fliers will know that it’s a nightmare to travel from East Africa to West Africa with many hours wasted due to connectivity. Currently, there is no direct flight between Nigeria and Algeria. The International Air Transport Association (IATA) indicates that it takes between 9 hours to 17 hours (depending on connectivity) for one to move from Algiers to Lagos – a direct flight would take about 4.5 hours. There is no doubt that such improved connectivity would benefit passengers and ultimately boost trade and tourism. Integrating airspaces will also boost cooperation between the 'big' and 'small' airlines which has major benefits like minimising ground handling costs in other countries away from the home countries of the national carriers.

It is therefore worth considering that integration of air transport sectors across Africa could be the easiest way for a newly revived airline like Uganda Airlines to extend its services to several destinations around the continent. Government of Uganda should therefore consider signing up to the SAATM. As the world increasingly becomes a global village, there will be little to be gained from protectionism. After all, the competitiveness associated with integration across the air transport sectors can only be a good thing for the standards to be kept.
 

                              
                              

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